Eagle Ford shale in South Texas sees drilling comeback

Posted at 8:48 AM, Oct 22, 2018
and last updated 2018-10-22 09:48:23-04

By JORDAN BLUM Houston Chronicle
CALDWELL, Texas (AP) – Three years ago, Allen Startz found himself in an unwanted kinship with thousands of other oilfield workers in South Texas’ Eagle Ford shale – laid off with few prospects nearby.

The Houston Chronicle reports he left his home in Bryan to work in the Permian Basin in West Texas, making plenty of money, but growing exhausted from the grueling 450-mile trip he made every couple of weeks to visit his family, whom he missed dearly.

Today, however, he wakes up in his own bed each morning and heads to a job operating oilfield services trucks in the northeastern Eagle Ford, just 30 miles away.

“I finally get to see my kids all the time,” said Startz, 52. “This is actually the first time I’ve ever worked and gone home on the same day. I’m getting back in the swing of things being a dad.”

Startz’s vastly improved work-life balance is the result of a slow, but increasingly sure comeback of the Eagle Ford shale, which, for most of the energy industry’s two-year recovery has been overshadowed by the booming Permian. On the 10th anniversary of the first discovery in the Eagle Ford this October, drilling is more active than at any time since the collapse of crude prices in late 2014.

Oil companies, contending with rising costs and shortages of workers, materials and pipelines in the Permian, are beginning to make new bets on the Eagle Ford’s 90 million-year-old shale rock. In the communities surrounding the formation, which stretches 400 miles from north of College Station to the Rio Grande near Laredo, people offer a sense that the hard times are ending, even if the Eagle Ford is no longer the epicenter of the nation’s oil and gas industry, as it was in 2012.

“I’d say it’s a rebirth,” said Rick Saldana, production superintendent for SM Energy, a Denver company drilling near Catarina, not far from the Mexican border. “It’s not a boom, but there’s a resurgence here in the Eagle Ford.”

Major Houston energy companies such as ConocoPhillips and Marathon Oil, which both have holdings in the Permian, are pivoting to the Eagle Ford. The British oil major BP, meanwhile, is poised to become one of the top players in the Eagle Ford when it closes its $10.5 billion acquisition of the Australian mining company BHP Billiton’s Texas shale holdings within the next few days.

About 100 drilling rigs are operating in the Eagle Ford, roughly half the activity from 2014, but well above two years ago, when fewer than 30 were active. Oil and gas production from the Eagle Ford again exceeds 2 million barrels a day of oil equivalent and should match the early 2015 peak of 2.6 million barrels a day by the end of 2019, said Lauren Droege, senior analyst for the research and consulting firm IHS Markit.

“The Eagle Ford is definitely still in great shape,” Droege said. “It’s not what it used to be, but there’s still a good bit of play left.”

The Eagle Ford’s advantage is that it is much closer to Gulf Coast markets and its oil is fetching higher prices than that produced in the Permian, where pipeline shortages and delivery challenges have forced producers to deeply discount their crude.

The Houston oil company WildHorse Resource Development is targeting the northeastern section of the shale, near College Station, where it holds 400,000 acres and has five rigs operating.

The last boom went bust just as that part of the shale play saw a spike in drilling. WildHorse views that as another advantage. The company, which will soon open a sand mine close by, is experimenting with drilling longer wells, using more sand and water in hydraulic fracturing to release more oil and gas from the shale rock, and employing fiber-optic monitoring to improve efficiency and production.

“We looked at this as an opportunity to consolidate an area that had been lightly developed in the Eagle Ford,” said WildHorse Chief Financial Officer Drew Cozby.

Not far from WildHorse’s operation, along Texas Highway 21 in the small city of Caldwell, a sign hangs in front of the Garden Spot Café: “All rig workers welcome here.” Michelle Boyd, who owns the restaurant with her husband, said she opens at 6 a.m. just to serve breakfast to the increasing number of oilfield crews.

“It was a divine intervention. I’ve tripled my business here,” said Boyd, who relocated the restaurant to the prime highway location in May. “The oil is bringing life back to the town. It was a slow haul, but now things are really starting to happen.”

The first Eagle Ford discovery was made in La Salle County, but a so-called sweet spot was found to the east in what’s known as the “Karnes trough.”

Allen and Lynn Brown opened the spacious Jerry B’s restaurant in Kenedy in Karnes County in 2006. Lynn, 72, described the first few years as a daily calamity set on repeat, with the locals dining there just enough to stay open. Then came the shale boom.

“There were so many freaking Cadillacs here it looked like a dealership,” she said. “It was crazy.”

A waitress could make $500 a night in tips from oilfield workers with cash burning holes in their pockets. Hotels, shops and bars sprung up all around; many of them collapsed with oil prices.

In Karnes City, both Louisa Villarreal and her husband found themselves temporarily out of work when he was laid off from his oilfield job and the bar she managed shut down. With three teenage children, she admitted they – like so many others – took the good times for granted, thinking the oil boom could last 20 years. They barely saved any money.

They struggled for months, and her husband found work at a local milling company. Now, with the oil on the rise, he’s back on the job in the Eagle Ford. She’s managing a restaurant, the 5D Grill and Lounge, which opened in the same location as her old bar.

“A lot of people have gone back to work, so things are much better,” Villarreal said. “But people are afraid it could bust again, so we’re all focused on saving this time around.”

Back in La Salle County, the city of Cotulla, population of 4,000, became the hotel capital of the Eagle Ford during the boom times. Cotulla has more than 25 hotels, almost all of which were built to house the influx of people surging into town for work. That’s about one hotel for every 150 local residents.

Rooms then typically sold for more than $200 a night. Now, most are just under $100 a night. But they’re all still open.

“Everyone coming to Cotulla wanted to put in hotels, but we needed other things like restaurants and shops,” said Patsy Leigh, manager of Cotulla’s Main Street program, who dared to dream of a bowling alley. “Instead, we ended up with 26 hotels.”

The Eagle Ford extends to the Mexican border, where cactus plants far outnumber the people. In Catarina, just north of the border, SM Energy employs about 90 people – nearly matching the town’s population of just over 100.

SM is drilling near the Rio Grande in Dimmit County, developing up to six wells at each drilling site. SM has more than 500 well sites in the region.

SM acquired a large swath of land in the region in 2008, covering what’s called the Olmos shallow gas formation. Little did the company know that deeper underground were the sizable natural gas reserves of the Eagle Ford. The acquisition, just as the initial Eagle Ford discoveries were disclosed, was mere coincidence.

“Luckily, we were here just before the Eagle Ford hit,” said Rick Saldana, SM’s production superintendent. “We were actually sitting on a goldmine without even knowing it.”

Saldana commutes every day from Laredo to lead SM’s expanding drilling plans in the southwest corner of the Eagle Ford. And, as Saldana likes to point out, the cash flow coming from SM’s Eagle Ford natural gas production kept the company afloat during the oil bust.

SM never completely stopped drilling for oil during the downturn. The company learned to turn a profit with oil prices at $40 a barrel, adding fiber optics to calculate fracking effectiveness and drilling horizontal wells up to the 15,000 feet, or nearly three miles long. Crude has climbed back near $70, and Saldana sees jobs and traffic returning to the isolated region.

The Eagle Ford’s recovery has come just in time for Bobby Battle. Battle, 49, of Round Rock, lost his job of nearly a decade after the Dallas merchant power company Luminant shuttered its coal-fired Sandow power plant early this year and the associated lignite coal mine, in large part because coal could no longer compete with lower-cost natural gas.

After working odd jobs for the better part of the year, Battle, just started a new job – along with more than a dozen other former Luminant workers – WildHorse’s sand mine in the northeast corner of the Eagle Ford, near College Station.

Battle said he feels fortunate to be employed full-time again and able to help support his family, including two daughters and a granddaughter.

“It’s definitely a blessing,” Battle said.

Information from: Houston Chronicle,

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